Background Checks and Compliance: What Small Businesses Need to Get Right in 2026

Hiring can feel high-stakes for small teams. You need to move quickly to secure candidates—but you’re also responsible for getting it right. One mistake in your screening process can lead to delays, compliance issues, or missed hires.

Following anti-discrimination and background screening laws isn’t just a tool to avoid risk. It’s primarily about supporting candidates and giving them a fair hiring process, enabling your team to move them efficiently from application to onboarding.

Here’s what small and mid-sized businesses should know about hiring in 2026—including key background check requirements, compliance considerations, and how AI is shaping hiring regulations.

One common hiring mistake for small businesses is trying to run background checks without a screening provider. In some cases, employers search state or local criminal records to conduct a basic check on candidates. In others, businesses skip background checks entirely.

Neither approach holds up as your business grows. Manual searches can miss records or surface incomplete information, creating compliance risk. Skipping background checks entirely can expose your business to avoidable risk—especially in roles involving finances, driving, or customer safety.

The following best practices can help your business build a compliant and efficient hiring process.

Background check laws often overlap with anti-discrimination regulations. If background checks aren’t applied consistently, they can unintentionally lead to discrimination.

A common best practice is to screen all candidates for a role—or to apply screening consistently to specific positions, such as driving roles. The key principle is job relevance.

Laws like Title VII, along with guidance from the Equal Employment Opportunity Commission, can help small businesses screen prospective employees effectively. They’re designed to protect candidates from discrimination throughout the hiring process. Under Title VII, employers may not discriminate against certain protected groups of individuals.

The Fair Credit Reporting Act (FCRA) is a federal law that governs how employers may use background check data to make hiring decisions. The FCRA also places limits on how certain records—such as non-convictions—may be reported in background checks. If information is older than the FCRA’s lookback period, it usually can’t be considered in a hiring decision.

One last thing to keep in mind: Sometimes federal and state guidance on lookback periods for background checks overlap. A best practice is to follow the stricter law in that case, so your business complies with both local and federal lookback restrictions. This goes for any background check regulation that applies to both local and federal jurisdictions.

Hiring and screening legislation frequently changes, particularly at the state and local levels. And if your business hires candidates in multiple states, you’ll need to be aware of the laws in each state—and use a background check provider who helps you comply with all those states’ regulations.

A couple of examples of legislation taking effect in 2026 include Virginia’s Clean Slate law and Washington’s Fair Chance Act (both effective July 1, 2026). If you already use a background check provider, talk with their team to make sure they’re updating their reporting accordingly: a Clean Slate law can change what offenses background checks are allowed to report.

If you hire across multiple states, manually tracking these changes can quickly become unmanageable. Many small businesses rely on a screening provider that automatically updates reporting and workflows in response to local regulations, reducing the need to monitor every change yourself.

The Fair Credit Reporting Act requires employers to update their candidates throughout the background check process. Before running a background check, you must provide a stand-alone disclosure statement. You’re also required to obtain written consent from candidates before you run the background check.

For small businesses, this isn’t just about compliance—it’s also about keeping candidates engaged during a process that can otherwise slow hiring down.

This also applies to issues with the background check and rejections: Candidates need to receive a copy of their background check results if a criminal record is reported on their check. Employers are required to give them sufficient time—usually a week—to explain their record or dispute any errors, which sometimes occur. If you decide not to hire the candidate, you must send them a final notice.

This process—called adverse action—lessens the likelihood that candidates will be turned away from a job due to a processing error, and it’s also an opportunity to give candidates with criminal records a strong chance. Keeping candidates informed about their background check process empowers them, helping them know exactly what’s happening at each stage.

As AI becomes more common in hiring, small businesses should also stay informed about regulations governing automated decision tools.

A few states have already enacted laws restricting how employers may use AI in employment decisions. California’s Civil Rights Council passed regulations requiring businesses to store data from automated decision systems (ADS) for four years, and employers may not use ADS to discriminate against any groups protected under the state’s Fair Employment and Housing Act (FEHA). Colorado and Illinois have also passed similar legislation.

AI regulations can feel complex—but staying informed about local and federal guidance can help you use these tools responsibly. If your applicant tracking system or other software is using AI to sort applications or perform skills assessments, you may need to have an audit conducted or create a disclosure for candidates.

It’s easy for HR and legal teams to feel overwhelmed by the sheer number of federal, state, and local regulations governing hiring procedures, particularly regarding background checks. One of the most effective ways to navigate these requirements is to keep the candidate experience at the center of your hiring process.

Almost every hiring law is designed to make the hiring experience better for candidates. From giving them transparent notice that you’ll be running a background check to keeping EEOC guidance in mind, you’re building a fairer, more compliant process. Using a third-party background check provider improves the hiring process for candidates, as they typically complete checks more quickly and are more accurate than DIY background checks.

Investing in a third-party background check provider puts the bulk of the work on your provider’s shoulders and streamlines information gathering. Not only do background check providers gather information from local, state, and federal sources, but they also often include built-in compliance features, such as FCRA disclosures and permission forms.

Ultimately, a reliable background check process builds trust with candidates and helps your team complete checks faster. A modern background check process can help your team hire faster while staying compliant.

Checkr offers pre-bundled background check packages designed for small businesses, with flexible add-ons for customization. Our support team is available 24/7 via live chat and email to help answer questions along the way.

About the author

Jenna Phipps writes about software solutions for businesses, including human resources, background checks, and legal compliance. Her work includes web articles and hiring resources for HR professionals and SMBs.